15 May 2007 23:39 [Source: ICIS news]
HOUSTON (ICIS news)--Ongoing gains by the Brazilian real (R) could hurt the country's ethanol exports in 2007, as the stronger currency will drive up prices for foreign buyers, market sources said on Tuesday.
The real traded at R1.99/US dollar on Tuesday, dipping below R2/dollar for the first time in six years.
The R2/dollar mark represents a psychological landmark for many Brazilians. The currency slumped to R4/dollar at its weakest level in 2003.
News reports in Brazil on Monday quoted a top government official blaming the weakness in the dollar for the strength of the real.
The real was behind 15 other foreign currencies that were making even bigger strides against the dollar, the official was quoted as saying.
Brazil ethanol exports totalled 3.4bn litres in 2006. While production was expected to increase by 10% in 2007, some market sources said they doubt exports will follow suit this year.
Among the factors that could dampen exports are a drop in US demand and the increasingly unfavourable foreign exchange rate.One trader said keeping exports at 2006 levels would be good for the industry, as domestic buyers would likely take care of the extra output in 2007.
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